J. Andrew Rogers andrew at jarbox.org
Sat Oct 8 16:01:55 PDT 2011

On Oct 8, 2011, at 2:27 PM, Ken Ganshirt @ Yahoo wrote:
> I want to say that this is self-evident by his success but that presents much too large a risk of my ignorance causing me to overlook whatever hidden costs might have been extant. E.g. are there other things he might have done with the resources he put into training and wages and shortening the working hours that might have produced "more" than what resulted from what he actually chose to do?

It depends on the cost structure of the business, it is hard to say if Ford could have done even better by applying the same capital elsewhere at the time. I am sure much has been written about it.

>From what other people have written, reducing employee churn was a big part of it. This is not surprising. When you hire a new person it is not uncommon to lose a few man-months of output initially while they learn the environment. Those are wages that are not generating any value. If it requires another person to do a significant amount of training, that increases the overhead of a new employee even more. High churn rate means the non-productive hours are being amortized over relatively few productive hours over the employment term. If you can reduce churn, the amortized loss per worked hour is less. More net value is generated per hour worked over the employment term. 

It may be apocryphal but apparently someone calculated that reducing churn by increasing wages reduced the amortized hourly loss more than it increased direct hourly costs.

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